Loans | Note 6. Loans The Company originates loans for sale to other financial institutions which issue commercial mortgage backed securities or to secondary government guaranteed loan markets. The Company has elected fair value treatment for these loans to better reflect the economics of the transactions. At June 3 0, 201 5, the fair value of these loans held for sale was $ 284.5 milli on and the unpaid principal balance was $278.9 million. Included in the gain on sale of loans in the Statement of Operations were gains recognized from changes in the fair value of $1.3 million for the six months ended June 30, 2015. There were no amounts of changes in fair value related to credit risk. Intterest earned on loans held for sale during the period held are recorded in Interest Income-Loans, including fees on the Statement of Operations. . The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the borrowers’ financial position and cash flow, past borrower performance, managements’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations. Major classifications of loans, excluding loans held for sale, are as follows (in thousands): June 30, December 31, 2015 2014 SBA non real estate $ 63,390 $ 62,425 SBA commercial mortgage SBA construction Total SBA loans Direct lease financing SBLOC Other specialty lending Other consumer loans Unamortized loan fees and costs Total loans, net of deferred loan costs $ 968,033 $ 874,593 Included in the table above are demand deposit overdrafts reclassified as loan balances totaling $1.7 million and $1.8 million at June 30, 2015 and December 31, 2014, respectively. Overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses. The following table provides information about impaired loans at June 30, 201 5 and December 31, 201 4 (in thousands): Recorded investment Unpaid principal balance Related allowance Average recorded investment Interest income recognized June 30, 2015 Without an allowance recorded SBA non real estate $ 263 $ 263 $ - $ 205 $ - Consumer - other - - Consumer - home equity - - With an allowance recorded - SBA non real estate - Consumer - other - - - - - Consumer - home equity - Total SBA non real estate - Consumer - other - - Consumer - home equity - December 31, 2014 Without an allowance recorded SBA non real estate $ - $ - $ - $ - $ - Consumer - other - Consumer - home equity - - With an allowance recorded SBA non real estate - Consumer - other - - - Consumer - home equity - Total SBA non real estate - Consumer - other - - Consumer - home equity - The following tables summarize the Company’s non-accrual loans, loans past due 90 days and still accruing and other real estate owned for the periods indicated (the Company had no non-accrual leases at June 30, 201 5 , June 30, 201 4 , or December 31, 201 4 (in thousands) : June 30, June 30, December 31, 2015 2014 2014 (restated) Non-accrual loans SBA non real estate $ 1,055 $ 1,233 $ - Consumer Total non-accrual loans Loans past due 90 days or more Total non-performing loans Other real estate owned - - - Total non-performing assets $ 3,286 $ 3,532 $ 2,056 The Company’s loans that were modified as of June 30, 201 5 and December 31, 201 4 and considered troubled debt restructurings are as follows ( dollars in thousands): June 30, 2015 December 31, 2014 Number Pre-modification recorded investment Post-modification recorded investment Number Pre-modification recorded investment Post-modification recorded investment SBA non real estate $ 184 $ 184 $ 197 $ 197 SBA commercial mortgage - - - Consumer Total $ 17,625 $ 17,625 $ 543 $ 543 The balances below provide information as to how the loans were modified as troubled debt restructurings loans as of June 30, 201 5 and December 31, 201 4 (in thousands): June 30, 2015 December 31, 2014 Adjusted interest rate Extended maturity Combined rate and maturity Adjusted interest rate Extended maturity Combined rate and maturity SBA non real estate $ - $ 184 $ - $ - $ 197 $ - SBA commercial mortgage - - - - Consumer - - - Total $ - $ 14,572 $ 3,053 $ - $ 543 $ - A s of June 30, 201 5, there were no loans that had been restructured within the last 12 months that have subsequently defaulted . As of June 30, 201 5 and December 31, 201 4 , the Company ha d no commitments to lend additional funds to loan customers whose loan terms have been modified in troubled debt restructurings. A detail of the changes in the allowance for loan and lease losses by loan category is as follows (in thousands): SBA non real estate SBA commercial mortgage SBA construction Direct lease financing SBLOC Other specialty lending Other consumer loans Unallocated Total June 30, 2015 Beginning balance $ 385 $ 461 $ 114 $ 836 $ 562 $ 66 $ 1,181 $ 33 $ 3,638 Charge-offs - - - - - Recoveries - - - - - - - Provision (credit) Ending balance $ 896 $ 302 $ 91 $ 868 $ 674 $ 87 $ 1,432 $ 2 $ 4,352 Ending balance: Individually evaluated for impairment $ 242 $ - $ - $ - $ - $ - $ 767 $ - $ 1,009 Ending balance: Collectively evaluated for impairment $ 654 $ 302 $ 91 $ 868 $ 674 $ 87 $ 665 $ 2 $ 3,343 Loans: Ending balance $ 63,390 $ 85,234 $ 16,977 $ 222,169 $ 512,269 $ 32,118 $ 27,044 $ 8,832 $ 968,033 Ending balance: Individually evaluated for impairment $ 976 $ - $ - $ - $ - $ - $ 2,212 $ - $ 3,188 Ending balance: Collectively evaluated for impairment $ 62,414 $ 85,234 $ 16,977 $ 222,169 $ 512,269 $ 32,118 $ 24,832 $ 8,832 $ 964,845 December 31, 2014 Beginning balance (restated) $ 419 $ 496 $ - $ 311 $ 293 $ 1 $ 2,361 $ - $ 3,881 Charge-offs - - - - Recoveries - - - - - Provision (credit) Ending balance $ 385 $ 461 $ 114 $ 836 $ 562 $ 66 $ 1,181 $ 33 $ 3,638 Ending balance: Individually evaluated for impairment $ 40 $ - $ - $ - $ - $ - $ 271 $ - $ 311 Ending balance: Collectively evaluated for impairment $ 345 $ 461 $ 114 $ 836 $ 562 $ 66 $ 910 $ 33 $ 3,327 Loans: Ending balance $ 62,425 $ 82,317 $ 20,392 $ 194,464 $ 421,862 $ 48,625 $ 36,168 $ 8,340 $ 874,593 Ending balance: Individually evaluated for impairment $ 197 $ - $ - $ - $ - $ - $ 2,253 $ - $ 2,450 Ending balance: Collectively evaluated for impairment $ 62,228 $ 82,317 $ 20,392 $ 194,464 $ 421,862 $ 48,625 $ 33,915 $ 8,340 $ 872,143 June 30, 2014 (restated) Beginning balance $ 419 $ 496 $ - $ 311 $ 293 $ 1 $ 2,361 $ - $ 3,881 Charge-offs - - - - - - Recoveries - - - - - - - Provision (credit) Ending balance $ 654 $ 491 $ 52 $ 988 $ 367 $ 55 $ 2,800 $ 393 $ 5,800 Ending balance: Individually evaluated for impairment $ 385 $ - $ - $ - $ - $ - $ 607 $ - $ 992 Ending balance: Collectively evaluated for impairment $ 269 $ 491 $ 52 $ 988 $ 367 $ 55 $ 2,193 $ 393 $ 4,808 Loans: Ending balance $ 53,046 $ 86,600 $ 4,748 $ 181,007 $ 319,854 $ 42,209 $ 47,884 $ 5,399 $ 740,747 Ending balance: Individually evaluated for impairment $ 1,307 $ - $ - $ - $ - $ - $ 2,969 $ - $ 4,276 Ending balance: Collectively evaluated for impairment $ 51,739 $ 86,600 $ 4,748 $ 181,007 $ 319,854 $ 42,209 $ 44,915 $ 5,399 $ 736,471 The Company did no t have loans acquired with deteriorated credit quality at either June 30, 201 5 or December 31, 201 4 . A detail of the Company’s delinquent loans by loan category is as follows (in thousands): 30-59 Days 60-89 Days Greater than Total Total June 30, 2015 past due past due 90 days Non-accrual past due Current loans SBA non real estate $ - $ - $ - $ 792 $ 792 $ 62,598 $ 63,390 SBA commercial mortgage - - - - - SBA construction - - - - - Direct lease financing - SBLOC - - - - - Other specialty lending - - - - - Consumer - other - - - Consumer - home equity - Unamortized loan fees and costs - - - - - $ 4,394 $ 662 $ 620 $ 2,666 $ 8,342 $ 959,691 $ 968,033 30-59 Days 60-89 Days Greater than Total Total December 31, 2014 past due past due 90 days Non-accrual past due Current loans SBA non real estate $ - $ - $ - $ - $ - $ 62,425 $ 62,425 SBA commercial mortgage - - - - - SBA construction - - - - - Direct lease financing - SBLOC - - - - - Other specialty lending - - - - - Consumer - other - - - Consumer - home equity - - Unamortized loan fees and costs - - - - - $ 5,092 $ 2,289 $ 149 $ 1,907 $ 9,437 $ 865,156 $ 874,593 The Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The following table provides information by credit risk rating indicator for each segment of the loan portfolio , excluding loans held for sale , at the dates indicated (in thousands): June 30, 2015 Pass Special mention Substandard Doubtful Loss Unrated subject to review * Unrated not subject to review * Total loans SBA non real estate $ 61,729 $ - $ 976 $ - $ - $ 1,595 $ (910) $ 63,390 SBA commercial mortgage - - - - SBA construction - - - - Direct lease financing - - - SBLOC - - - - Other specialty lending - - - - - Consumer - - - Unamortized loan fees and costs - - - - - - $ 443,007 $ - $ 4,671 $ - $ - $ 16,890 $ 503,465 $ 968,033 December 31, 2014 SBA non real estate $ 49,214 $ - $ 197 $ - $ - $ 669 $ 12,345 $ 62,425 SBA commercial mortgage - - - - SBA construction - - - - - Direct lease financing - - - - SBLOC - - - - Other specialty lending - - - - - Consumer - - Unamortized loan fees and costs - - - - - - $ 389,677 $ 346 $ 2,203 $ - $ - $ 59,067 $ 423,300 $ 874,593 * Unrated loans consist of performing loans which did not exhibit any negative characteristics which would require the loan to be evaluated, or fell below the dollar threshold requiring review under the Bank’s internal policy and are not loans otherwise selected in ongoing portfolio evaluation. The scope of the Bank’s loan review policy encompasses commercial and construction loans and leases which singly, or in aggregate for loans to related borrowers, exceed $3.0 million. The loan portfolio review coverage was approximately 46% at June 30, 2015 and approximately 45% at December 31, 2014. As a result of transferring loans into “Discontinued Operations” (see Note 15), management is currently assessing the review scope for the remaining portfolio to ensure appropriate coverage levels are maintained. This review is performed by the loan review department, which is independent of the loan origination department and reports directly to the audit committee. Potential problem loans, which are identified by either the independent loan review department or line management, are reviewed. Adversely classified loans are reviewed quarterly by the independent loan review function of the Bank. Additionally, all loans are subject to ongoing monitoring by portfolio managers and loan officers. Also, many of the Bank’s loans are relatively short term, and are subject to reconsideration with a full review in loan committee between one and three years after the loan is made and after the prior review . |